Cultural distance, innovation and export performance

Abstract

Purpose This paper aims to examine the relationship between cultural distance (both perceived and objective), innovation and firm export performance. Design/methodology/approach Hypotheses were tested here by structural equation modeling using data from 186 export ventures into 23 international markets by Swedish companies. Findings The results indicate that managers’ perceptions of substantial cultural differences as well as objective cultural differences (gauged using Hofstede’s (1980, 2001) scores for dimensions of national culture) and subsequent environmental uncertainty when expanding into culturally distant markets triggers strategies for interacting and integrating with the market environment. These include producing and adopting innovations to processes and products and to organizational strategy, structure and administrative procedures to cope with the new environment and overcome uncertainties. These innovations and the associated competitive advantages improve firm export performance. Originality/value Despite much research into the relationship between firm internationalization and innovation, little attention has been paid to the effect of the characteristics of the foreign markets (specifically cultural differences) on firm innovation strategies. Moreover, much research has been devoted to the effect of innovation on firm export performance, but such research has mainly focused on one type of innovation, i.e. technological innovation, while the influence of organizational innovation on firm export performance has been basically ignored. The present study validates the explanatory of cultural distance (both perceived and objective) in relation to innovation strategies (technological and organizational) and export performance.

Hofstede’s cultural dimensions and R&D intensity as an innovation strategy: a view from different institutional contexts

“…Firstly, we control organisational size (e.g. Azar and Drogendijk, 2016), denoted as SIZE and calculated as the log of the total assets of firms; return on assets (Zhang, 2011), labelled as ROA, and calculated as operating income before interest and taxes over total assets; and the firm's leverage (Min and Smyth, 2016), denoted as LEVERAGE. Additionally, board size (Chouaibi et al, 2009) and board independence (Balsmeier et al, 2017) are controlled, labelled as B_SIZE and B_INDEP, respectively, and calculated as the number of directors on the board and the ratio between the total number of independent directors on the board and the total number of directors on the board.…”

“…The industry effects are also controlled (e.g. Azar and Drogendijk, 2016). We use the TRBC economic sector classification provided by Thomson Reuters.…”

Entrepreneurial perceptions and bias of SME exporting opportunities for manufacturing exporters

“…A relatively more research-oriented firm will tend to develop its new products faster and thus enjoy a first-mover advantage (Lim et al, 2006). A vast amount of literature has addressed the relationship between firm's research capabilities and their tendency to export (Azar and Drogendijk, 2016;Kotabe et al, 2002) . Firm's export sales found to be driven by R&D spending.…”

Analysis of Business Performance of Housing Developers in Makassar City

“…Research results [8], [9]; [4], [13], [18], [16], shows different results namely environment and strategy solely not influenced by company performance, but by considering other variables. This research offers a solution by adding innovation variables as a mediation to improve business performance.…”